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Debt debate that divided Congress and hurt markets could affect Florida's budget

TALLAHASSEE — The federal debt debate that has divided Congress and disrupted financial markets next could affect state budget writers.

Florida's credit rating appears safe with Standard & Poor's giving it a boost in July and Republican leaders in the Legislature crafting recent budgets with warnings from financial ratings agencies ringing in their ears.

But the debt deal in Congress includes $2.1 trillion to $2.4 trillion in cuts over the next decade, which could trickle down to Florida where federal spending remains the state budget's largest source of money.

Most of the federal cuts have not been identified — a so-called super committee is tasked with finding $1.5 trillion in savings.

But at least $917 billion in automatic cuts start next year and could mean less money for programs like highway construction and housing assistance. The initial cuts will not touch Medicaid spending, which accounts for nearly two-thirds of the $24 billion in federal money in Florida's current budget.

Still, some lawmakers worry that less money for Florida will further handcuff state budget writers, who have relied on federal money — plus $2 billion in new fees and cigarette taxes in 2009 — to piece together a state budget that is $4.6 billion smaller than 2006.

"The cuts we've been making have been so over the top," said Rep. Evan Jenne of Dania Beach, a top-ranking Democrat in the Florida House. "Further cuts will only hurt more."

But some lawmakers hope the super committee will put health care cuts on the table.

Republican leaders said they would accept less money for Medicaid, which helps with medical bills for 3 million Floridians, in exchange for a "block grant" for the program.

In return for Medicaid money, Florida must provide coverage for everyone who is eligible, generally children, pregnant women and the poor. A block grant would instead provide the state with a lump sum and let Florida lawmakers decide what health costs should be covered.

"Hopefully there is a renewed interest at the federal level that will allow us to manage this program in a better way," said Senate budget chief J.D. Alexander, R-Lake Wales. "We can very legitimately make reductions without jeopardizing the health care services being provided for people."

Senate President Mike Haridopolos, R-Merritt Island, said the super committee should remove other requirements on federal money for transportation projects and education.

"We would be willing to accept less money if it meant we could spend it how we saw fit," Haridopolos said.

Federal cash eclipsed spending from the state's general revenue fund for the first time in decades in 2009, when President Barack Obama's stimulus program helped shore up state budgets across the country.

Florida's general revenue fund tumbled 23 percent between 2007 and 2009 as sales taxes and fees from real estate transactions dropped off.

At the same time, federal cash in the state budget increased nearly 30 percent.

Across the country, $155 billion in stimulus money helped increase total state spending in 2009 and 2010, even though state funds declined in both years, according to data from the National Association of State Budget Officers.

The group's annual meeting in Utah this week has been peppered with talk about the federal spending cuts, said Brian Sigritz, the group's director of fiscal studies.

"There's a lot of uncertainty right now," Sigritz said.

Nationally, federal funds accounted for 34.7 percent of state budgets while state general revenue funds were 38.1 percent, according to NASBO.

In Florida, federal spending dropped 10 percent in the state budget from last year, but remains the single biggest source of money despite efforts from Gov. Rick Scott to reduce the state's reliance on Congress.

Scott made federal spending a top priority, yet declined to veto $370 million in stimulus money from this year's budget.

But his skepticism of the federal government led to controversial decisions to reject $2.4 billion for a high-speed rail project and turn down federal grants for education and health care.

Under pressure from Scott earlier this year, lawmakers approved a budget that was 2 percent less than the previous year. That budget helped persuade Standard & Poor's to change the "negative" outlook on the state's AAA rating to "stable."

Chief Financial Officer Jeff Atwater said the long-term challenge for Florida's credit rating could be federal spending cuts.

"So long as they (in Congress) address their programs that they've established and don't put additional burdens on the state, then we should be fine," Atwater said.

Times/Herald staff writer Katie Sanders contributed to this report. Michael C. Bender can be reached at [email protected]

Debt debate that divided Congress and hurt markets could affect Florida's budget 08/11/11 [Last modified: Friday, August 12, 2011 12:13am]
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